Ontario Prime Minister Doug Ford decided to suspend proposed export tariffs on electricity destined for the US after US Secretary of Commerce Howard Lutnick initiated emergency trade discussions. Ford’s move followed US President Donald Trump’s declaration of a forthcoming 50% tariff on Canadian steel and aluminium.
The announcement from Trump triggered market instability, prompting swift reactions from Canada. The Trump administration responded with criticism of Ford’s remarks, describing them as unacceptable, but the urgency of the situation escalated beyond mere words.
Understanding Tariffs
Tariffs are customs duties imposed to protect local producers by making imported goods more expensive. They differ from taxes in that tariffs are prepaid at the port, whereas taxes are settled upon purchase.
Economists remain divided on the merits of tariffs, with some viewing them as necessary protection for domestic industries, while others warn they may lead to increased prices and trade tensions. Ahead of the November 2024 presidential election, Trump plans to utilise tariffs to bolster the US economy, particularly targeting Mexico, China, and Canada, which constituted 42% of total US imports in 2024.
Ford’s decision to temporarily halt the planned electricity tariffs demonstrates that economic strategy often changes when political pressure mounts. Before this shift, Canada was gearing up to retaliate against the White House’s move on steel and aluminium—industries that are deeply interwoven with both economies. However, with Lutnick stepping in for unscheduled talks, it became apparent that Canadian authorities saw room for negotiation rather than immediate escalation.
Trump’s insistence on a 50% tariff was not designed in isolation. With the November election approaching, protectionist policies are being shaped not just for economic reasons but also for political gain. Metal industries have historically been a focal point of trade disputes, and the reasoning is straightforward. Steel and aluminium production employ many voters in key states, and duties that curb foreign competition can be framed as protective measures. Meanwhile, the reaction from Ford—though firm at first—now leans towards damage control, reflecting the broader concern that retaliatory tariffs might backfire.
Market Reactions And Future Outlook
What is clear from the fallout is that the impact of these trade actions is not confined to the industries directly involved. Markets reacted immediately, with traders adjusting their positions to factor in potential supply disruptions and price fluctuations. The sequence of events also underscores the risks that come with uncertainty. Whenever tariffs of this scale are introduced, costs can quickly cascade through industries dependent on those materials, influencing everything from manufacturing expenses to stock market valuations.
For those following the futures and options tied to electricity, metals, and manufacturing goods, the next few weeks could bring pronounced fluctuations. Trade negotiations, especially last-minute ones, tend to generate temporary price swings before a longer-term trend emerges. This scenario creates opportunities, but it also introduces volatility that requires careful hedging. The abrupt policy shifts from both governments suggest that further announcements could come with little notice, influencing price movements in ways that may not immediately appear logical.
Whether additional duties become a reality or negotiations lead to revised terms, industries reliant on these materials must anticipate further changes. Steel and aluminium pricing, in particular, will remain sensitive to developments as businesses assess supply chain disruptions. Meanwhile, the energy sector—having been momentarily pulled into the dispute—now finds itself in a precarious position, as exporters to the US may still face policy adjustments in the near future.
With tariffs positioned as a campaign tool in the lead-up to the election, this pattern of uncertainty is unlikely to subside anytime soon.
